World Bank Approves Additional Financing to Support Infrastructure Investments in Indonesia

The World Bank has approved $200 mn in financing to support infrastructure investment in Indonesia, an emerging economy faced with an enormous gap in infrastructure financing.

 

Washington, March 24, 2017 – The World Bank’s Board of Executive Directors Friday approved $200 million in financing to support infrastructure investment by the private sector in Indonesia, an emerging economy faced with an enormous gap in infrastructure financing.

This is an additional financing to support a private sector non-bank financial institution, PT. Indonesia Infrastructure Finance (IIF). The World Bank and The International Finance Corporation (IFC) had already supported PT IIF, which facilitates financing for commercially-viable infrastructure projects in the country.

Also Read:  Indonesia`s Foreign Debt Grows by 5.3 Percent in October 2018

“There is an enormous need for investment in infrastructure and people, as the country aspires to become a prosperous, high-income nation. Better infrastructure leads to improved competitiveness for goods and services and expanded access to basic services, benefitting the country’s poorest,” said Rodrigo Chaves, World Bank Country Director for Indonesia.

Indonesia faces an infrastructure financing gap of $50 billion to $60 billion a year, with a loss of more than 1 percent of gross domestic product (GDP) due to under-investment in infrastructure.

Inadequate infrastructure, along with weak logistics and transportation, has led to road congestion, energy shortage and slower business growth.

Poor water and sanitation also cause cancer and other health problems.

Also Read:  ASEAN Has Larger Buffers Against Capital Outflows, Says Economist

 

Infrastructure market needs sustainable long term capital

The additional financing will allow PT IIF to fund larger, longer-term infrastructure projects and enhance the firm’s senior debt and equity operations.

“Indonesia’s infrastructure market needs sustainable long term capital – particularly long term debt in Rupiah – to ensure that infrastructure projects are financially sustainable. There is increasing recognition that public funding alone will not be enough to fill the financing gap in infrastructure,” said Christopher Juan Costain, World Bank Team Member.

In 2009, the World Bank provided $100 million in financing to PT IIF. The funds have been used to develop more than 18 projects in the transport, power, renewable energy, and telecommunications sectors.

Also Read:  Indonesia's Q4 GDP Growth Slows to 4.9%

“This additional fund will support our long-term vision to become the leading catalyst for financing infrastructure development in Indonesia, particularly by the private sector. Strengthened participation of the private sector is required to meet the need of massive infrastructure projects throughout the country,” said Ari Soerono, CEO of PT IIF.

The support to infrastructure investment is a key component of the World Bank Group’s Country Partnership Framework for Indonesia, which focuses on government priorities that have transformational impact.

The government has ramped up efforts to improve infrastructures throughout Indonesia. (T/RS5/RS1)

Mi’raj Islamic News Agency (MINA)